- Direct investing in Latin American private companies by institutional investors set to rise
- Latin American LPs intend to double their private equity exposure to Latin American infrastructure
- International LPs plan to grow their private equity holdings in real assets
Half of investors in Latin American private equity believe that low entry valuations and good availability of dealflow within the continent are attractive compared with other emerging markets, according to the annual Coller Capital/LAVCA Latin American Private Equity Survey.
The Survey confirms the trend toward more direct investing by LPs (i.e., proprietary investments into private companies and co-investments alongside GPs). Just over two thirds (68%) of LPs expect to have direct investments in Latin American private equity in three years’ time, compared to only 42% who currently have direct exposure.
Private equity investment in ‘real assets’ is an increasingly popular area. Some 41% of Latin America-based LPs have private equity investments in the continent’s infrastructure today, but 88% of them expect to do so within three years. Latin American investors also intend to add to their private equity holdings in timber, real estate, mining, and farmland assets.
Within the same three year timeframe, at least twice as many international LPs will have private equity exposure to real estate, infrastructure, timber and farmland in Latin America as is the case today – though fewer are targeting increased private equity exposure to Latin American mining assets than their local counterparts.
The pace of new commitments to private equity will remain strong in the coming year, with 95% of Latin American LPs planning to increase their commitments to the asset class. Pension funds in Brazil, Chile, Colombia, Mexico, and Peru manage roughly US$770b.
LPs investing in Latin American private equity indicated that they are willing to look at new GPs. One third of respondents have invested at least once in a debut Latin American fund from a new GP over the last 7-8 years.
It is particularly encouraging to see both domestic and international institutional investors focusing on private equity exposure to infrastructure within Latin America. This is something that governments all over the world hope to encourage within their own geographies, as a boost to development and national economic wellbeing
LAVCA President Cate Ambrose said: “As the private equity ecosystem in Latin America continues to mature, we are seeing greater and more sustained interested from local and global institutional investors. Despite current negative macroeconomic trends in the region, investors are taking a long-term view of the market and putting money to work in recession-proof sectors.”
Pan-regional funds are the most popular access route to Latin American private equity, with two thirds of international LPs, and just over half of Latin American LPs, expecting to be committed to pan-regional funds within three years. In the same time period, 64% of international LPs expect to commit to Brazil-focused funds.
Additional Survey findings:
The 2015 edition of the Survey also charts investors’ views and opinions on the following aspects of Latin American private equity:
- Return expectations
- Exit routes
- Popular investment strategies
- Attractive industry sectors
- Influence of ESG factors on LP investment decisions
